As a digital nomad, you have the liberty to work from almost anywhere in the world, so why not choose a location that’s not only inspiring but also tax-friendly? When it comes to European countries, some offer significantly lower taxes for remote workers than others. In this article, we’ll delve into the best European countries with the lowest taxes for digital nomads, starting with Montenegro, and explore a few others to consider.
Montenegro
The small, picturesque country of Montenegro on the Adriatic Sea is becoming an increasingly popular destination for digital nomads. It offers affordable living, incredible landscapes, and a favorable tax system. Personal income tax rates in Montenegro are flat and relatively low at 9%, making it an attractive option for digital nomads.
Besides, the country offers a straightforward process for obtaining temporary residence, especially if you own property in the country or have a local employment contract.
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Bulgaria
Bulgaria, a country known for its rich history and beautiful landscapes, also offers an appealing tax rate for digital nomads. The country boasts a flat tax rate of 10% on personal income, making it one of the most tax-friendly countries in Europe. Coupled with the country’s low cost of living and the availability of high-speed internet, Bulgaria is a worthwhile consideration for digital nomads.
Estonia
Estonia is a pioneer when it comes to embracing digital nomads. It was the first country to introduce a Digital Nomad Visa allowing remote workers to live in Estonia and legally work for a foreign employer or as freelancers.
Moreover, Estonia operates under a progressive taxation system. However, it offers a unique setup where retained and reinvested corporate profits are not taxed. Taxes are only applied on distributed profits, which is beneficial for digital nomads running their own businesses.
Portugal
Portugal, particularly cities like Lisbon and Porto, has become a hot spot for digital nomads, and for a good reason. Portugal offers the Non-Habitual Resident (NHR) scheme, allowing new tax residents to receive certain types of income, including self-employment and royalties, tax-free for the first ten years. However, navigating the NHR scheme might require professional tax advice to ensure all conditions are met.
Malta
Located in the heart of the Mediterranean Sea, Malta offers a high quality of life and a favorable tax system. While its tax rates may seem high at first glance, Malta provides generous tax refunds to shareholders, which can ultimately result in an effective tax rate as low as 5%.
Digital nomads are advised to study the tax implications carefully in their home country and the potential tax country. Consulting with a tax advisor can be beneficial to fully understand the tax laws and how to make them work in your favor. With the right planning and advice, digital nomads can make the most out of these tax-friendly European countries while enjoying a highly mobile and flexible lifestyle.
Cyprus
Cyprus is another country that digital nomads should consider. Not only does it offer a warm climate and beautiful beaches, but it also has attractive tax incentives. The country uses a progressive tax rate, but any income less than €19,500 is not taxed. Moreover, 50% of income from employment exceeding €100,000 per annum is exempted from taxes for a period of ten years.
Ireland
While Ireland may not have the lowest tax rate, it does offer a Special Assignee Relief Program (SARP) for people who are assigned to work in Ireland from abroad. Under this program, a portion of the income is exempt from Irish tax, resulting in an effective lower tax rate. It’s also worth mentioning that Dublin has become a tech hub in recent years, attracting numerous digital nomads and tech companies.
United Kingdom
The UK offers a unique opportunity for digital nomads through its non-domiciled tax status. If you’re a resident in the UK but “domicile” elsewhere, you only pay tax on your UK income – not your foreign income or capital gains – unless you bring them into the UK. London is also one of the world’s leading tech hubs, offering plenty of opportunities for digital nomads.
Final Thoughts
While lower taxes can be an appealing factor when choosing a country to reside in, digital nomads should also consider other factors such as cost of living, lifestyle preferences, safety, language barriers, and local laws.
It’s also important to note that tax laws can be complex and vary greatly from one country to another. Therefore, before making a decision, it’s recommended to consult with a tax professional to understand the potential tax obligations in your home country and abroad.
Embracing the digital nomad lifestyle provides an exciting opportunity to explore new cultures, landscapes, and experiences while continuing to advance your career. By taking into account the tax implications of your chosen destination, you can make a more informed decision and find the right balance that suits your professional and personal aspirations.
